The Supreme Court of Ohio

Attorney Services Fund

2012ANNUAL REPORT

ATTORNEY SERVICES FUNDANNUAL REPORT

Summary of Activity for Fiscal Year 2012and Report on Allocations for Fiscal Year 2013

October 2012

PRESENTED TO

MAUREEN O’CONNOR

Chief Justice

PAUL E. PFEIFER

EVELYN LUNDBERG STRATTON

TERRENCE O’DONNELL

JUDITH ANN LANZINGER

ROBERT R. CUPP

YVETTE McGEE BROWN

Justices

PRESENTED BY

STEVEN C. HOLLONAdministrative Director

SUSAN B. CHRISTOFFDirector of Attorney Services

PREPARED BY

SUSAN B. CHRISTOFFDirector of Attorney Services

JACQUELYN BELAIRAttorney Services Specialist

LORI GILBERTAttorney Services Specialist

KATHRYN GUINNAttorney Services Specialist

TERESA McCOYAttorney Services Specialist

LEI MOOREAdministrative Assistant

JODIE MARMONCLE Specialist

DENISE SPENCERCLE Specialist

BARBARA WHITEAttorney Services Specialist

TAMMY WHITEAttorney Services Manager

Office of Attorney Services

To: Chief Justice Maureen O’Connor and Justices Members of the Ohio Bar Members of the Public

This Annual Report on the Attorney Services Fund provides a summary of the activity of the Attorney Services Fund for Fiscal Year 2012 (July 1, 2011 to June 30, 2012), and sets out budget allocations from the fund as approved by the court for Fiscal Year 2013 (July 1, 2012 to June 30, 2013).

The report includes a review of the fund’s balance and projections, audit information, and investment policy. This information is provided for informational purposes only and is not to be considered a final or complete audit or financial statement of fund activity during the period covered in the report. The auditor of state conducts an audit of the fund as part of the regular biennial audit of the Supreme Court of Ohio.

Respectfully submitted,

Steven C. Hollon, Esq. Susan B. Christoff, Esq.Administrative Director Director of Attorney Services

The Supreme Court of Ohio

I. Attorney Services Fund; Registration Requirements and Fees

Article IV of the Ohio Constitution vests plenary authority with the Supreme Court of Ohio to regulate all aspects of the practice of law in Ohio, including admission to the practice of law, the discipline of persons admitted to the practice of law, and all other matters relating to the practice of law. In furtherance of this responsibility and in order to maintain an independent and self-funded regulatory system, the Supreme Court assesses and collects various fees and other moneys pursuant to the Supreme Court Rules for the Government of the Bar of Ohio. All moneys collected pursuant to the rules, other than those related to the bar admissions process, are deposited in the Attorney Services Fund (“fund”).

Biennial Registration Requirements and FeesRule VI of the Supreme Court Rules for the Government of the Bar

of Ohio (Gov. Bar R. VI) imposes a biennial registration requirement on each attorney practicing law in the state of Ohio. Each attorney licensed to practice law in the state, except for attorneys who are on inactive or retired status, and each non-Ohio attorney registered for corporate status must register with the court on or before the first day of September in each odd-numbered year. Each active attorney and each non-Ohio attorney registered for corporate status is required to pay a $350 registration fee at the time of his or her biennial registration. Registration fees are reduced or waived for attorneys who are admitted to practice in the second year of the registration biennium. Revenues from attorney registration fees are significantly lower in odd-numbered fiscal years because attorneys are required to register with the Supreme Court during even-numbered fiscal years.

The Supreme Court imposes monetary sanctions on attorneys who fail to register timely with the court. Gov. Bar R. VI imposes a late registration fee of $50 on any attorney who fails to register with the court by the due date. An attorney who remains unregistered more than 60 days after the due date is summarily suspended from the practice of law and must register, pay all outstanding registration fees, and pay a $300 reinstatement fee in order to be reinstated to the practice of law.

Attorney Services FundAll registration, late registration, and reinstatement fees are paid into

the fund. The fund also receives revenue from other sources pursuant to the Rules for the Government of the Bar, including cost reimbursements from disciplined attorneys, civil penalties and costs assessed against persons who are found to have engaged in the unauthorized practice of law, registration fees collected from out-of-state attorneys wishing to seek permission to appear pro hac vice in Ohio tribunals, and income from the investment of moneys deposited in the fund.

Pursuant to Gov. Bar R. VI, Section 7(A), the moneys in the fund are used to (1) fund the disciplinary process; (2) support the activities of the Clients’ Security Fund, the Commission on Continuing Legal Education, and the Board on the Unauthorized Practice of Law; (3) fund any activity considered necessary by the Supreme Court for the government of the bar and the judiciary of Ohio; and (4) fund any activities related to the administration of justice considered necessary by the Supreme Court.

2 Attorney Services Fund

Schedule 1 (see page 7) of this report contains a summary of fund expenditures for Fiscal Years 2011 and 2012 and allocations for Fiscal Year 2013.1

II. Summary of Fund Activity in Fiscal Year 2012

In Fiscal Year 2012, $8,627,240 was expended from the Attorney Services Fund.

Disciplinary-Related ExpensesIn Fiscal Year 2012, $4,984,561 was used to fund the disciplinary process

established by the Court in Gov. Bar R. V and Gov. Jud. R. II, “Disciplinary Procedure.” This is 57.8 percent of total fund expenditures in Fiscal Year 2012. Of this amount, $2,487,103 was expended by the Office of Disciplinary Counsel, which accounts for the entire operational budget of that office. A total of $835,360 was expended by the Board of Commissioners on Grievances & Discipline to fund the operation of the board. An additional $1,633,140 was expended by the board to reimburse local bar association certified grievance committees for disciplinary-related activities. Further, $389 was expended for costs related to proceedings under Gov. Jud. R. II, “Disciplinary Procedure.” The Supreme Court reporter of decisions expended $28,569 to publish legal notices in newspapers of general circulation upon the court’s issuance of a disciplinary order, as required by Gov. Bar R. V, Section 8(D)(2).

Clients’ Security FundSince 1985, the Supreme Court has allocated moneys from the Attorney

Services Fund to compensate clients who are victims of theft, embezzlement, or misappropriation by dishonest attorneys. The Clients’ Security Fund is established in Gov. Bar R. VIII and is administered by an independent board of commissioners appointed by the court. By rule, the board may award a client up to $75,000 to reimburse clients’ financial losses incurred as a result of attorney misconduct. In Fiscal Year 2012, $371,173 was expended by the Board of Commissioners of the Clients’ Security Fund for its operation. In addition, the Supreme Court allocated $1.4 million to replenish the Clients’ Security Fund trust fund. Together, these amounts represent 20.5 percent of Attorney Services Fund expenditures.

In Fiscal Year 2012, the board expended a total of $929,994 from the trust fund to reimburse 175 eligible claimants. As of June 30, 2012, 292 claims were pending, representing a potential liability to the fund of $2,317,144. For more information regarding claims against the Clients’ Security Fund, see the most recent annual report prepared by the Board of Commissioners of the Clients’ Security Fund.

1Fiscal Year 2012 budget allocations were restated for operations in the Office of Disciplinary Counsel, the Board of Commissioners on Grievances & Discipline, the Clients’ Security Fund, and the Office of Attorney Services. An additional $389 was allocated to cover expenses related to Gov. Jud. R. II (“Disciplinary Procedure”) proceedings.

2012 Annual Report 3

Attorney Services AdministrationThe Attorney Services Division of the Supreme Court is comprised of

the Office of Attorney Services and the Office of Bar Admissions. These two offices are charged with assisting the court in the exercise of its constitutional responsibility to regulate the practice of law in Ohio. The offices are reponsible for administering the biannual bar examination, reviewing applications for admission to the practice of law, conducting character and fitness investigations of persons seeking admission to the practice of law, registering attorneys each biennium, maintaining attorney and judge continuing legal education records, and registering out-of-state attorneys who will be seeking permission to appear pro hac vice in Ohio tribunals.

A total of $886,506 was expended for the Attorney Services Division in Fiscal Year 2012. These moneys, which represent 10.3 percent of total fund expenditures, supported the operations of the Office of Attorney Services ($586,853), the Commission on Certification of Attorneys as Specialists ($626), the Commission on Professionalism ($14,172), and the Board on the Unauthorized Practice of Law ($5,803). Further, $29,052 was expended on reimbursement of expenses related to investigation and prosecution of unauthorized practice of law matters. Finally, a $250,000 supplement was transferred to the Office of Bar Admissions to support its operations.

Discretionary GrantsThe remaining $985,000 in fund expenditures represented grants to two

nonprofit organizations that assist the Supreme Court in providing oversight of the Ohio bench and bar, and in the administration of justice. In Fiscal Year 2012, the court awarded grants of $330,000 to the Ohio Legal Assistance Foundation and $655,000 to the Ohio Lawyers Assistance Program. These grants represent 3.8 percent and 7.6 percent, respectively, of fund expeditures.

The Ohio Legal Assistance Foundation is established pursuant to statutory authority and has, as its primary responsibility, the duty of administering and allocating various funds for Ohio’s legal aid programs. These programs provide direct civil legal assistance to low-income Ohioans who qualify for services. The moneys contributed from the fund to the foundation are used for pro bono development and enhancement, technology enhancement and support, and performance assessments of legal aid programs.

The Ohio Lawyers Assistance Program provides intervention and monitoring assistance to Ohio lawyers, judges, and law students who are suffering from alcoholism, substance abuse, or mental illness. In addition to moneys allocated from the fund, the program receives contributions from the Ohio State Bar Association, the Ohio Bar Liability Insurance Company, and other entities.

4 Attorney Services Fund

Fund Income and BalanceThe fund realized income and revenue of $16,540,006 in Fiscal Year

2012 from the following sources: (1) $15,576,400 in biennial registration fees, including late fees, reinstatement fees, and fees collected pursuant to Gov. Bar R. XIV (“Certification of Attorneys as Specialists”); (2) $192,569 for reimbursement of costs; (3) $15,387 in net investment income (net of banking fees charged); (4) $579,250 in revenue collected pursuant to Gov. Bar R. X (“Attorney Continuing Legal Education”); and (5) $176,400 in revenue collected pursuant to Gov. Bar R. XII (“Pro Hac Vice Admission”). The fund had an estimated average monthly cash and investment balance of $16,227,123.

III. Report on Allocations for Fiscal Year 2013

The Supreme Court allocated $9,152,553 from the Attorney Services Fund for the fiscal year beginning July 1, 2012. The allocations are made to 10 entities representing 13 separate funds or activities.

Disciplinary-Related ExpensesThe court allocated $5,444,133 (59.5 percent of total fund allocations)

to support the operation of the disciplinary process. This figure includes separate allocations of $2,738,118 to fund the Office of Disciplinary Counsel; $865,015 to fund the operation of the Board of Commissioners on Grievances & Discipline; $1,800,000 to reimburse certified local grievance committees for their work in investigating and prosecuting disciplinary matters; and $41,000 to the reporter of decisions for publication of disciplinary orders issued by the Supreme Court.

Clients’ Security FundClients’ Security Fund operations are funded by an allocation of $386,112.

An additional $1.4 million is allocated to the replenish Client’s Security Fund trust fund and ensure a sufficient fund balance. This represents 19.5 percent of the total fund allocations.

Disciplinary Expenses

Clients’ Security Fund

Attorney Services Administration

Ohio Legal Assistance Foundation

Ohio Lawyers Assistance Program

FIGURE 1: Fiscal Year 2012 Expenditures

2012 Annual Report 5

Attorney Services AdministrationA total of $937,308 (10.2 percent of total fund allocations) was allocated

to fund the activities of the Attorney Services Division of the Supreme Court. This allocation includes: (1) $689,708 to the Office of Attorney Services; (2) $24,000 to support the operation of the Board on the Unauthorized Practice of Law and an additional $136,500 to reimburse bar associations for costs incurred in investigating and prosecuting allegations of the unauthorized practice of law; (3) $61,550 to support the activities of Commission on Professionalism; and (4) $25,550 to support the activities of the Commission on Certification of Attorneys as Specialists.

Discretionary GrantsThe court approved a grant of $330,000 to the Ohio Legal Assistance

Foundation for its work in supporting the delivery of civil legal services to indigent persons. The court also awarded a grant of $655,000 to the Ohio Lawyers Assistance Program for alcohol, substance abuse, and mental health intervention programs. Together, these grants represent 3.6 percent and 7.2 percent respectively, of the fund allocations for Fiscal Year 2013.

IV. Fund Balance and Projections

On June 30, 2012, the fund had a balance of $14,653,823. In Fiscal Year 2013, the fund is projected to realize income of $1,206,586 (including fees, reimbursements, and interest income) and expend an estimated $9,152,553. On June 30, 2013, the fund will have an estimated balance of $6,707,856.

V. Audit

The auditor of state conducts a complete audit of the Attorney Services Fund on a regular basis. The audit occurs at the same time as the audit of other funds that are appropriated to or collected by the Supreme Court. The most recent audit of the court was for Fiscal Year 2012. At the time of this report, the court does not expect the auditor to issue any findings or comments related to this audit. The next audit of the Attorney Services Fund has not yet been scheduled.

Disciplinary Expenses

Clients’ Security Fund

Attorney Services Administration

Ohio Legal Assistance Foundation

Ohio Lawyers Assistance Program

FIGURE 2: Fiscal Year 2013 Allocations

6 Attorney Services Fund

VI. Investment Policy

Attorney registration fees are deposited directly into a bank lockbox maintained by U.S. Bank, where they are invested in financial instruments. U.S. Bank was selected to maintain the fund’s lockbox through a competitive bid process for moneys deposited and collected in Fiscal Years 2011 and 2012.

The fund’s moneys are managed in a conservative, risk-adverse manner through investments made in compliance with the Uniform Depository Act, as set forth in Ohio Revised Code Chapter 135, and amended by the Investment Reform Act of 1996. These and other state and federal laws require that the fund’s moneys not be placed at risk in the marketplace through investments in derivatives, reverse purchase agreements, or any method of leveraging.

The fund’s investments are primarily in federal money market accounts such as commercial paper and chosen because they carry higher interest repayment rates than bonds and avoid high insurance bank charges. Investment income is net of fees charged and does not include earnings credit for balances held to offset fees. The fund continues to seek more optimal investment options, as permitted by statute.

VII. Summary

The Attorney Services Fund allows the Supreme Court to maintain an effective and efficient system for licensing attorneys and regulating post-admission aspects of the practice of law, consistent with its responsibility under the Ohio Constitution. The fund also provides important financial resources to organizations that aid in the provision of legal services to the poor and assist lawyers who are suffering from alcoholism, substance abuse, or mental illness. All activities supported by the fund are invaluable in ensuring the public’s continued trust and confidence in the legal system.

The fund is in a solid financial position and it is expected that it will maintain that position throughout Fiscal Year 2013.

VIII. Comments and Inquiries

Any comments and inquiries regarding this report or the fund may be directed to Steven C. Hollon, administrative director, or Susan B. Christoff, director of Attorney Services, Supreme Court of Ohio, 65 South Front Street, Columbus, Ohio 43215-3431.

2012 Annual Report 7

SCH

ED

UL

E 1

Published by The Supreme Court of OhioOctober 2012

65 South Front Street Columbus, Ohio 43215-3431

The Supreme Court of Ohio